Project Management 101: Why Use Estimated Hours?

Before we start talking about Estimated Hours, we should first discuss Actual Hours. So if you have never tracked time spent on jobs, the whole concept of estimated hours is probably quite foreign to you.

So let’s start with some definitions…

Estimated Hours – the amount of time you think it’s going to take someone to complete a task or a project.

Actual Hours – the real amount of time it took to finish that task or project.

Estimated Hours vs. Estimated Duration

Keep in mind that Estimated and Actual hours should not be confused with Estimated or Actual Duration. The latter is the number of calendar days that was planned/spent on a task.
Because people are usually working on multiple tasks at any given time, it’s quite common to see a situation when a task takes 3 days to complete (actual duration), but requires less than 8 hours of the actual efforts (actual hours).

In order to know the actual hours spent on a task, one should track their time. There are various ways and different tools to track time and we’ll certainly cover this topic in a future. But for now, let’s assume that you and your team have been recording your time religiously. That’s where Estimated Hours come into play and bring lots of benefits to you as a project manager. Here are the top 3…

Benefit #1: Preventing going over a budget

During the planning phase please make sure that your team provides estimated hours for each and every task in your project. Then you’ll be able to compare those numbers against running summary of the actual hours spent by your team and easily detect any possible budget overrun.

Benefit #2: Earned Value Analysis
A more advanced way to monitor your project health is to use a method called Earned Value Analysis (EVA). It takes into an account your project progress, estimated hours, actual hours and provides you with a visual indication of your project performance.

Benefit #3: Historical Data for Future Planning

The history of Estimated and Actual Hours for the completed projects is invaluable as a forecasting tool. There are many great use cases for it. Here are just a couple:

Sometimes a new project comes along that is similar to what you already dealt with in the past. By reviewing the estimated and actual hours from the previous project you can learn from the past planning mistakes (if any) and provide a more accurate and realistic estimation this time.

If you let the team members responsible for the tasks do their own estimation (which, by the way, is a very good practice), after a while you can learn how accurate they are with their estimates and add an appropriate amount of “padding” to their assessments. For some reason it’s always “add” and never “deduct”.

As you can see, using Estimated Hours properly is instrumental to your project success. So go ahead and try this practice with your next project!